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Squawk on the Street

News/Business. Melissa Lee, Carl Quintanilla, David Faber. Opening bell market action. New.

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03:00:00

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mpeg2video

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ac3

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480

TOPIC FREQUENCY

Europe 33, Us 22, Cisco 17, U.s. 11, Washington 9, S&p 8, Israel 6, Dennis Van Roekel 6, Cnbc 6, Sandy 5, Obama 5, America 5, Romney 4, Rendell 4, Gary 4, Bob Pisani 4, Geico 4, Rick Santelli 4, Lowe 4, California 4,
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  CNBC    Squawk on the Street    News/Business. Melissa Lee, Carl Quintanilla,  
   David Faber. Opening bell market action. New.  

    November 14, 2012
    9:00 - 12:00pm EST  

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lows in yesterday's session. we're digesting economic data which show the impact of hurricane sandy. retail sales down 0.3%. down five of the past six sessions. eurozone industrial production dropping the most in three years. we do see red arrows across the board. a big meeting today in washington between ceos and the president over the fiscal cliff. reports today say obama wants 1.6 trillion in new taxes, two times what republicans were offered last year. is this whole negotiation going nowhere? >> cisco not only surprises the street with a beat but says the u.s. enterprise business is showing signs of improvement. and abercrombie silences the
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shorts. >> the president is scheduled to meet with a dozen ceos this afternoon to hear their concerns about looming tax increases and spending cuts. 73% of participants in a "wall street journal" ceo council conference said the fiscal cliff is their primary concern. goldman chairman and ceo lloyd blankfein talking about the importance of avoiding the fiscal cliff. he writes there's more than a trillion dollars of cash that is sitting on the balance sheets of u.s. nonfinancial companies with certainty about tax rates, companies will increase their capital expenditures currently at anemic levels contributing to a virtuous cycle of jobs and growth." if there was a disagreement as to whether this is becoming a mainstream story. story of "usa today," a giant cliff and inside a chart of how it will affect people. this is getting real.
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>> the editor of "usa today" is the single best print journalist going today. he understands what the pulse is. he gets how you have to simplify it to make it understandable. this was a remarkable piece of journalism. he gave his whole front page on the web to this story. dave cote will meet with the president today and he's the spearhead guy. he said on "mad money" last night, when we retire people, we're not hiring many people anymore. it's not worth it. i hear executive after executive say better to fire now. want to look smart when it happens. that's the world we're in. >> we have sound of what cote told you last night. >> if we just kind of kick the can down the road, we have under 2% gdp growth with 8% or higher unemployment for as far as you can see until the crisis really hits. >> there it is. he calls himself a member of the
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radical middle. one thing i want to address to everybody out there with our campaign to rise above, i see this and i speak to a lot of ceos. i don't like to talk individual politics with people. when you speak to ceos, most are republicans and most support our mission. that's important because it's a mission that's a democratic mission by a lot of people is the view and i resent that. if you speak to ceos, they want to grow. we don't want to fire. we're republicans. big change. >> last night you said there's a place on the wall of shame for anyone who stands in the way of a deal. >> we're going to do that this week. i did take a page from taken and say i will pursue them. i will find them. i'll name them on the wall of name. >> stand in the way of a deal in what fashion and what sort of deal? stand in the way of the president's proposal? >> is the president asking for -- >> does he deserve a place on the wall because he's making it
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more difficult to reach a deal? i'm curious. >> many people want to go over the fiscal cliff. people who want the defense budget cut and feel the defense budget is wasteful. perhaps the headlines actually lately out of the military will make people feel a stance. people who feel they are able to teach america a lesson to go over the cliff. the cliff jumpers feel very strongly that they are doing the right thing. while i favor the first amendment, i think it's an important way to be able to discuss things. i cannot -- there's a discussion that says it's great if we jump at of fiscal cliff with the data of what happens so there are people that support jumping off the fiscal cliff as a way to teach america a lesson. >> there will be people that will discuss it every day and people in this markets are focused on it. it's a negotiation. as such even though it will take place in the public realm to a
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certain extent, we're going to just have to wait. there are those -- i think wall street in some ways seems to be more positive perhaps than the broader populous about the possibility of a deal. it does make sense that a deal will take place. we know that debt levels are unsustainable when you look into the future. we also know that we have a tax regime that needs to be fixed. we know that we're spending too much. we know a lot of those things. our leaders know them too. i'm going to stake out a more optimistic point of view on this. you are undermine my entire argume argument. forget my optimism. back to where i was. neutral. >> there's a four-star general that will be head of a major command. these are major stories whether we think they are "melrose place" or homeland and they will
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dominate the discussion in congress and the fiscal cliff will be pushed aside by it. they are too important to the american people in terms of interest and congress will, i believe, bow to the notion they ought to put everything aside including the fiscal cliff and fully investigate allen and petraeus. >> you can't put it aside. as of january 1st we do have a $500 billion tax increase. you can take that and of course come back and say we're going to give you all tax cuts on january 5th when we reach a deal. >> aren't you the virtuous one. i don't want this to happen. >> get you one of those hats. the covers. >> he's not bad. he's not a bad guy. >> he's doing better than other people on the show. >> the ten commandments. >> i'm aware of those. >> i'm fearful of this. i read the paper today. there's a fiscal cliff on the right side and then there's the drifters of tampa and i just
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fear that congress is going to be gripped by the witch-hunt. >> we were up 83 yesterday on home depot and ibm and it all got lost in the afternoon because of concerns like these. >> i know. >> our apologies if you don't watch "homeland." >> "saturday night live," which is our own network, made it clear there were people that were upset because they couldn't get "homeland." >> meantime, shares of cisco up sharply in premarket. the networking equipment company reported better than expected fiscal first quarter profits of 48 cents. cisco attributing results to higher revenue from services and in the words of chambers, guys, too early to call a trend in u.s. enterprise but we're continuing to like what we see. >> wasn't that something? five firms downgraded or cut estimates or believed that he would lower his outlook. he didn't. he took -- he basically said we're crushing hewlett pack
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we're crushing juniper. we can say circuits weren't good. this was a bullish call. >> he's been right on macro stuff. more than he's been wrong. >> i respect this call. i thought it was very thorough. he did a great job on this call and critical. >> i heard the same. i talked to money managers this morning. people listen to this cisco call who don't necessarily even own the stock because it's such an important barometer for so many things. and their opinions were similar to yours. very positive call in many ways. >> fiscal cliff comes up quickly in one of the questions. he makes it clear that enterprise is good. can you imagine how much the federal government has cut back in spending and how profitable government spending is but they
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triumphed over. >> europe comments more temper. how much does that matter? >> you'll see in q-1 of next year europe becoming executives will say we are managing europe down. we're not going to make europe a key part of -- when they did the euro single currency and lots of companies rushed, particularly technology companies rushed to europe. you'll see in q-1 companies saying, look, we have maintained our european. don't worry about european. if they don't say it, i think we'll sell the stocks. >> worse before it gets better was on the conference call. >> industrial production misses this ridiculous fight between the eu and imf. bank of england cutting growth outlook for the u.k. >> gdp tomorrow. it will be terrible. alco alcoa being struck because they try to close a plant.
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the conversation will be at the beginning of the conference call and europe -- we're managing europe down to x. european we're going to close europe. ford motor gave you an example of what will happen. we won't let europe bring our company down. latin american, asia turn turne. we won't let europe ruin us. europe will be isolated. that's what happens if you decide to go off the grid like they're doing. their major issue is carbon tax. they keep talking about carbon tax. the european, the german power company talking about having too much solar power which is bringing down and able to make money so they bring in coal. that's what they talk about? >> wow. >> back to the network side of things. we almost went a 360 here. >> that's the nature of our discussion. >> juniper and river bed are up on the back of cisco's earning
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report. >> emc is the biggest partner. he called that out. i felt like the cruise ship speech. he takes the shoe off will bury. people haven't bothered to read the call. everyone thought that hewlett was eating lunch but he took it to hewlett. i never heard him be this combative. i think he wants -- >> i'm not sure hewlett goes up anymore. >> you have sap going up. pc business in disarray. intel hitting 52-week low. how good is the printer business? best buy? sop what business is going to come to the fore to see hewlett
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packard. they may be the jcpenney of technology. >> those are rough words unless you are very positive on jcpenney. which i don't believe you are. kind of like jpmorgan. they threw in the towel. a great move. >> it's time. it's time. >> as for hewlett packard, the best you can hope for there is what you will hear many times. it will be a turnaround that will take many years but it is going to result in a company that's very different from the one you see right now or at least different in some ways and built to compete. >> what did he have going for him? who did he bring in to make it happen? the late jerry york who would call everybody negative on ibm and say are you going to bet against me in the mid 40s? the stock -- are you going to bet against me in mid 40s. i'll fire everyone until we hurt revenues. york doesn't get enough credit. >> ceo of ibm.
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>> a killer. >> animal. i can't believe we didn't talk about abercrombie but we're going to after the break. we're all over the fiscal cliff. former pennsylvania governor ed rendell will join us. should the president stick with this call for 1.6 trillion in additional tax revenue. and ahead, national education association president dennis van roekel was at the meeting. we'll talk retail sales numbers that give us a first look at life after sandy. "squawk on the street" is back in a moment.
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dow up 43 points. s&p up six. we'll see how that pans out at the open about 14 minutes time. government data showing retail sales falling 0.3 in october hurt by store closures and damage related to superstorm sandy. meantime, shares of abercrombie & fitch soaring in premarket trade blowing past wall street estimates and raising full-year guidance saying it sees strong sales in the u.s. and improving international trends and we should caution people that there's a significant short interest in the stock. 12% of shares outstanding are held short in this. what we're seeing could be driven in part by a squeeze. >> obviously there is a lot of earnings power. talking about quite a bit
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number. they've been terrible at forecasting. do want to point out that from time to time you had a company that will earn $3 earning power. the rumors of lbo will start. maybe that's part of the frantic covering. >> okay. have you just started them? >> radio shack can no longer be rumored because it's barely visible. best buy has an underwhelming meeting. i don't want the facts to get in the way of a good story here. >> as they should not and unfortunately as they do not when it comes to business journalism these days. we'll see. retail has certainly been something that pe is focused on. some of the best returns in terms of deals we can think of. dollar general for example. retail deals. i've been reporting on one that's a retail deal. advance auto which is going to require a large equity check. we'll see. the names do come around a lot and result in nothing on names like this at least. >> how could you ever -- with
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the up and down think that you could gain. >> you said this before even with the squeeze today gets us back to september levels. 240 basis points on gross margin helps, yeah? cotton is cheaper than a year ago. >> true. there is also the international seems to have turned a bit. that was a black hole. a lot to like in the quarter mostly because there had been a lo the to dislike in previous quarters. >> concern about retail in general, you said this before about the fiscal cliff. right now it seems according to -- a lot of analyst and shareholders in these stocks seems like consumers aren't too focused on the fiscal cliff right now to the point where it impacts buying right now. as these talks start getting heated in the next couple of weeks, that butts up against black friday and the holiday shopping season. if it really hits, you know, in terms of the tensions between congress and the various parties, we'll see that start playing out into the holiday shopping season. >> do we think people are going
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to make that decision they will focus on my taxes going up on january 1st and i won't spend money? it's possible but i don't think it's probable. >> i think that there's been "usa today" being the case that there's not been a lot of recognition among the public. home depot, dick's, coors, all of those conference calls it was ignored. >> for now. last night on "mad money" cramer gave you ideas for keeping your portfolio airborne in this environment. what sky high advice is he about to give right now? jim's mad dash is coming up next and romney for president policy adviser lanhee chen. take a look at futures as we start into the open bouncing off three month lows. "squawk on the street" continues right after this. i always wait until the last minute. can i still ship a gift in time for christmas? yeah, sure you can. great. where's your gift? uh...
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>> jim and his mad dash talking. this week is a watershed week for nat gas in general. >> cold in new york. 28 degrees. that often can burn off the inventory. clean energy fuels had them on last night. why focus on this? they have a clear growth path to build out stations. lloyd blankfein said in his editorial that key thing for growth in our country is energy. abundant energy. i thought we should look at clean energy that would benefit.
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markwest, this is a company that has a price above where they did secondary. look at the "wall street journal" word on the street. they say that maybe mlps have been oversold. if we're going to drill in this country for more energy, i like to think of halliburton down to 30. some people will say weatherford upgraded by a number of people and then let's not forget chesapeake. they came out this morning in a piece last night said we're more nat gas than i would like to be in ohio. when i spent time in ohio, 80% of what we put out on rigs is nat gas. you need the markwest pipeline to take natural gas to chesapeake to bring it to the east or to give it to clean energy fuels and in order to be able to drill oil, that's halliburton. that's the family of names that i'm focused on. >> does it extend to larger cap names? some say that ge is well positioned here. >> i spent time talking about
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how big ge can be in this industry. we read in a piece in "the wall street journal" that ge teamed up with chesapeake to put a box in your house with whirlpool to gas up and i want to see how is big that is. general electric has done remarkable things in terms of really large plafactories that n natural gas into something we can use. ge wants to be gigantic in energy. i think they can because they dominate the natural gas turbine business. yes. can it move the needle? it's huge. certainly one where they are focused. >> a lot of material in what you just told viewers. good stuff. cisco points to a rally. will that mark the end of the tech correction? plus lockup expiration on facebook. 777 million shares online today. how will that open? we'll get the answer after the opening bell in just a moment. number store different? ap
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nasdaq looking at sixth consecutive weekly drop. talking about tough in tech. potentially four weeks down for the dow. you know that we have lost as many points so far in november as we did for october. 340 points in october. 340 points in november. >> we're halfway through. >> it would be the first two-month drop since august/september of last year. >> there is a carolyn that i love. she always points out to these relationships. that's a situation where i have to go back to a mathematician. >> appreciate that. i thought he was a violinist. might be both. >> we t'd up facebook before the break. stock was down 6%. second one hit, stock down almost 4%.
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yelp has shown that it doesn't mean it has to fall. >> they trapped them. i have to tell you, i'm inclined to want to buy this. let me give you an example of what i hear. the color. yesterday they said that facebook is a terrific way to get business. i find this over and over again. buffalo wild wings said it. domino's said it. >> is it by placing ads or having a page on facebook? >> sponsors. the revenue stream that's developing. i think ever since there was a public face and actual face, i want to buy facebook. i want to buy it. >> there's the opening bell here at the big board. we're going to eat well today. the james beard foundation celebrating 25 years of outstanding chefs and at the nasdaq newtek business services. >> facebook is higher on the open here up by 0.8 of 1%. we'll see to you it closes.
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if you took a look at intraday chart on the last lock of expiration, there's a huge fluctuation from open to close. it will be interesting to see what this action is especially considering this is an enormous lock of expiration. maybe the biggest one we've seen. >> yelp obviously -- >> guys are hedged against it. you have some that are getting locked up in there to lower the price any way. a higher price. they're not going to be selling. there are also some of the originals that are much lower prices that may have a reason to sell. >> they are taking zynga cfo who is leaving. >> i'm warming up -- just kidding. still way too early. groupon is in formative stages. groupon were giving me something involving a laser thing.
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james bond and lasers. is that what that's about? no, mr. bond, i want you to die. is that what they're offering me? >> it's hard to make fun given the pain they have brought. >> true. >> no doubt about that. >> raymond james downgrades home depot saying that as hard as it may be, housing even know frank blank brought it up on the call is a contributor to growth and not yet the anchor to growth. >> the stock is at 70 for heaven sake. i read that downgrade. i was on the conference call. herb greenberg said maybe you ought to go. valuation could be momentarily stretched. that was a remarkable call. housing does continue to do well. if the fiscal cliff intrudes, you should sell. if you believe it will go and 120 million people -- you showed me those tax rates from the "usa today" and that's an impact play. that's an impact. i don't want t to home depot and spend $55 on the average ticket if i feel like the tax
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increase. >> holding onto gains today even though valuation is stretched on a five-year basis. >> other people recommending lowe's as a catchup play. lowe's is an inferior company to home depot. if the industry really comes back because of sandy -- i think that people are -- there's a lot of discussion about what sandy can mean. home depot lost more stores and had more stores close off irene but substantial off sandy. i have to get to home depot that is in long island. i think that's going to be the tell this weekend if we can get there, david. >> are we going to try? >> you both are going to try. >> i want to take david to home depot. they have everything there. you would be just shocked. >> going out for ice cream.
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>> as long as we don't have to try on women's shoes. >> that is just -- they just opened another -- in the saks call they talked about another zip code store in florida where there's a whole floor of shoes. what we could do is we would take a winter break together and visit that zip code opposed to the zip code of -- >> if we're going down there, i might do it. i might do it. warmer weather you can show off your legs so that's nice too. >> okay. maybe we go to tampa bay. see what they have. >> i hear all of the action is in tampa. >> south beach. if you're going to do it, do it. >> you should do it up. >> the journal takes a crack at icahn versus hastings today as we keep an eye on take two where the action is getting hotter for carl. >> a blog post yesterday that they hired some time ago.
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listen, carl, i can tell you what i know. carl's calling people trying to get meetings with potential buyers for netflix. i spoke to people that will probably meet with carl. they have very little if no interest in actually buying it but everyone will go see carl because it's nothing if not entertaining. maybe you have a couple martinis, you relax, you talk, you get to heardom on things. we'll see what develops here. it's very much -- i think it's clear that reed hastings is not interesting in selling this company at this point. we'll see what carl is able to do in terms of even surfacing potential buyer which remains unclear although amazon is still the name if you ask enough people, that's still the number one name. i have no idea if there's any -- and then we'll see what happens from there. they put poison pill in. hastings doesn't want to sell. carl gets into these things. he likes to see if he can create his own outcome. we'll see if he can. >> did you buy a nice tv lately?
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>> i'll be in the market for one in the not too distant future. >> if you buy a best buy tv, i bought one for my father. i said why would i buy one f my dad? who am i defrauding? one of the things my father demanded that they now is if there is a netflix butt on on your remote. that's mind share when you have a netflix button on your remote. that's important. >> nobody says their domestic business is not a great business. the questions come back to international and whether you can hide it off, separate it in some way, harvest the cash from the domestic business. >> you're not that negative? >> i'm not anything. i'm just telling you what i've reported. >> you are something. >> i'm faber. >> thank you. >> i think you ought to back off that investigation. >> i'm standing down now.
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>> i know. i'm sorry. i'm sorry. i'm sorry. >> let's check in with bob pisani here on the floor with more on what's moving this morning. >> happy wednesday morning. so my e-mail was full of chagrin traders with we got word president obama was looking for 1.26 trillion in tax issues over the next decade. that's twice the number he had been talking about last summer in negotiations. the early signs are positions are getting hard. there's still a lot of hope they can make this deal here. most traders noted the real negotiations begin on friday because that's when the president meets with congressional leaders and not just business leaders like today or labor leaders like yesterday. we'll see on all of that. china, a lot of comments on china this morning. political transition is now largely over and they got through it and now a lot of people are saying where's the stimulus ideas? where's the concept. the stock market is doing nothing right now. they are sitting at 3 1/2-year lows. no bump in anticipation of any
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kind of stimulus. there's a lot of different opinions flying around. all i can tell you is right now the markets aren't acting like they're going to get a lot from there. we're just off 3.5-year lows. speaking of china, talk about that call that happened late yesterday. they lowered the numbers for phosphate and for some of the other key ingredients like podash. it's interesting. mosaic said international suppliers and that had people wondering if it is the rest of the world too, could it be latin america? when i asked the people what this meant because they didn't cite specific countries, a lot of people said there's changes in the way the distribution of fertilizer is going on. a lot of retailers aren't ordering a lot in advance. they are waiting to see what customers do. customers are farmers obviously. they are waiting to see whether the prices are going to be impacted and waiting to see how much actual orders they're going to be for the farmers before they just go out and order on that. they used to do that. now there's a bit of change in
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the way fertilizer is being bought around the world. let me move on. ipo speed bump. there were three ipos that were supposed to price today. trade today and price last night. none of them happened. a lot of people are trying to figure out what happened. bottom line is we had a drug maker and asset management and small energy company, energy and exploration partners all failed to attract sufficient levels to actually be floated. two of them are postponed. that's radius and silver crest asset management. they can come in the future. other one energy and exploration partners was withdrawn overall. i will keep an eye on that. the big one is going to come in the next few days. we'll have a big telecom maker that will price thursday night and that will be the big ipo for the week. that's the one that's really got a price right now. finally i want to note, did you see what happened to abercrombie? international down a little bit.
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finally, a downgrade of home depot. i've been waiting for it. 21 times forward earnings is a real problem. raymond james downgraded them today specifically for that reason. great company. great management. 21 times forward earnings, that's a big multiple. back to you. >> thank you, bob. we do want to point out facebook on the day of the huge lockup expiration. shares are soaring in early action. up 6.3%. some analysts out there including one we had on air yesterday of pivotal research estimated that based on calculations more like less than 500 million shares were going to be sold potentially. so we should mention here and then also there's a zynga impact of facebook being higher as well. that's something to watch in terms of the derivative impact. zynga is up also. >> there is -- you know, my best guy who visited them last week visited facebook.
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they are telling -- they are flushing out the idea that this sponsored story business is really taking off. i believe there are too many ceos that come on "mad money" saying facebook is vital to our next level of growth. >> that's what people seized on from the last conference call on last earnings is increase they were seeing every day in terms of that part of the business. >> when zuckerberg said we didn't have anything mobile but we're not going to sit there, he's a very smart man. they recognized they had a problem. they owned they had a problem and they're addressing the problem. what more can you want? i thought that was professionally done. all right. let's head to the bond pits. rick santelli in chicago. >> we'll go fast. lots of charts. bob pisani mentioned chinese currency. wow. look at it. a decade and a half high against the greenback as you can see on the 20-day chart. the power shift proceeds it seems as though the currency is
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proceeding higher. now, if we look at a two-day chart of her ten years, rates are up. haven't been able to see that much. three-month chart reveals why. if you talk about 160 yield down here, they would call that the pivot. you want to watch that level. above or below would dictate the next 30 basis points. if we look at muni market, it is moving toward historic low yields. why? fiscal cliff, tax issues. everybody on the investor side of course trying to get around some of these potential tax hikes. remember, no matter what a lot of these nonpartisan groups say like office of budget and management or any of them in the real world taxes make people's behavior change. now, if you look at the currency side of the equation, the yen is the big trade everyone is discussing on this floor today. look at a 24-hour chart. the dollar is skyrocketing. what does it mean on the bigger picture a year-to-date chart of the dollar/yen reveals we're close to breakout on the
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dollar/yen. a big bright spot impacting dollar index. jim, back to you. >> thank you, rick. it's interesting to see a dollar versus yen versus fxe. let's check out latest news on energy and go to bertha coombs at the nimax. >> good morning, jim. a little bit of a weaker dollar helping out the energy complex though we're watching wti. we'll not get inventory numbers today because of the veterans day holiday. won't get those numbers until tomorrow. we're expecting to see a build in crude. big drawdown when it comes to gasoline and heating oil because of issues affecting refineries and the terminals here in the northeast. one of the things that traders are also watching when it comes to the wti nimax contract is the support levels. around 84.50 is the support. you also have the 50-day moving average about to cross below the is 1 00-day moving average.
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it's one of the things people will watch over the next couple days. >> bertha coombs, thank you very much for that. president obama to meet with ceos about the fiscal cliff but in the end it will be up to congress to rise above partisanship to reach an agreement. republican senator roy blunt will tell us whether he thinks there are grounds for compromise coming up. new information on the software pioneer wanted to murder. we have details on what john mkafee is tell cnbc. we'll look at the early movers. topping the list, anf.
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new details on software pioneer wanted for murder. john mcafee saying he is accused of something he didn't do.
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he's moving every four hours and he's fearful for his own safety. authorities are looking to question mcafee in the murder of a man found shot to death in his villa. they were neighbors on an island off the belize coast. you have met him and interviewed mcafee. >> i spent a good amount of time with john in 2009 doing a piece called "the bubble decade." he made a fortune during the early parts of the tech bubble when he launched mcafee and he sold it but then he lost most of his wealth in the housing crash. fascinating guy. there we were in the boat. we went into the jungle. we saw a number of his plants and where he was harvesting things for the lab in which he was making -- they were making antibiotics and other medicine. he loved belize because he felt there were no real laws is what he told me.
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and we'll see what the future holds for mr. mcafee. certainly a fascinating man. >> you're not making a call -- would you ever fear for your own safety when you were with him? >> no, i did not fear for my safety. i went up in one of those things, that was probably against cnbc policy. i did go up in one. that was great. he has a fleet of those trying to turn into a tourist attraction as well. when i did go to his home at night, it did have a james bond villain type of feel to it. he was playing the piano. it was dark. we came in by boat. i did feel as though, okay, this is interesting. >> entries in the shape of his head? >> there wasn't. the eerie piano playing was
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unsettling. >> you, of course, were james bond. more of a daniel craig. >> i'll take that. >> i think daniel craig is -- well, i'm a guy. he's the hottest guy in the world. >> don't do that. be nice to me. >> get away from me. >> when we come back, we'll cover the bases on the fiscal cliff including potential impact on housing. would you still buy a home without a mortgage interest deduction? but first -- >> announcer: coming up, investing in this martin can be fooit qui quite the fight. that's why we have cramer with six stocks in 60 seconds. we'll help you a void the mess when "squawk on the street" returns.
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let's get to simon hobbs. >> the game is changing on the fiscal cliff. ed rendell will join us to talk about that very important
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question. if tech is awful, why is john chambers knocking it out of the park at cisco and keeping an eye on facebook as the lockout expires. back to you. >> turning into a surprising day on the facebook front. six in 60. six stocks in 60 seconds give or take a few. we'll start with weatherford. >> this is the worst oil services company. we have firm after firm upgrading it. i want to warn people to be careful. this is not for regular people. >> interesting numbers out of harley. >> just keeps delivery. it makes me feel like they're not worried about the fiscal cliff at home. >> edwards lifesciences. >> a terrific heart failure treatment but it's not being taken up. >> baxter. >> this is one of the best stocks if you believe fiscal cliff. it does fine regardless. >> you need that medicine regardless. >> yes. >> jack in the box. >> they say it's time to move.
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jack in the box had been higher. >> and then a day after home depot, lowe's is next week. >> if you want to know, if you think sandy is going to be good, you're going to go to lowe's. i still like home depot better. and regular show tonight. i'm unveiling the best beats of the earnings season that have been forgotten. >> do you have a tease? a hint? >> lets just a say that someone of them are retail. surprising. people forgot them. >> we have a couple minutes to chat. cote on last night. big press conference today from the president. any sense to what the tone will feel like come 4:00? >> i think it's important to point out, i did this on twitter today, many of the people supporting the effort were republican but they feel like the election did say something and there is another worldly thing going on which is the president says the election was
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a mandate. the business leaders feel that it's a bit of mandate. business leaders backed the wrong guy. the loser guy. i'm not saying he isn't the greatest thing in the world. i think the tone will be, listen, maybe we got off the wrong track too. maybe it isn't just you, mr. president. we have to get together. that's important. what's most amazing is that cote is a great businessman. he can't hire in this environment. he wants to make the numbers. he has to do what's right. this is a continuing theme that i'm hearing, carl, which is they can't hire. it's not in our own minds. harley may be doing well. polaris may be doing well. coors may be doing well. what these guys see is i can't make my end which is to get the -- remember, if jobless claims come out tomorrow and they're bad, you'll get a hint here that it would be the beginning of what are the people who are ceos saying i'm on hold and if we get jobless claims bad, meaning we go back to
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380,000, it will go down big. >> one of the most alarming ideas out there, "the washington post" today small business, nfib beginning to say big business guys meeting with the president don't necessarily have their interests at heart and you get the business community with some fighting and that's not healthy. >> the business community does back more republicans than democrats. if you're a republican, i think you may be worried about your funding if you are running for election. i think that's a crux issue. how do you like that? oil and gas meets mr. president. mr. fossil fuel meets mr. president. >> see you tonight, jim. 6:00 and 11:00 eastern time. breaking news on business inventories minutes away and then tobias levkovich and playing facebook after the biggest post-stock lockup.
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we'll talk about that when "squawk" comes back. [ female announcer ] the power to become a better investor has gone mobile. with features like scanning a barcode to get detailed stock quotes to voice recognition. e-trade leads the way in wherever, whenever investing. download the ultimate in mobile investing apps, free, at e-trade.
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well, having a ton of locations doesn't hurt. and my daughter loves the santa. oh, ah sir. that is a customer. let's not tell mom. [ male announcer ] break from the holiday stress. fedex office. welcome back to "squawk on the street." business inventories for the month of december rose as
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expected. we're looking for 0.6 and what does this mean for all of those that are watching the market ignoring business inventories? ignore at your own peril. this is still a third quarter number. we have revisions coming out in a couple weeks on third quarter gdp. it will be our second time around the block. looking at the market response, it is minimal. we continue to see the post response to a week retail sales amount. dragging down the equities before that 8:30 release, up 40 in pre-openingfutures. >> thank you, rick santelli, in chicago. let's get the road map for the next hour. the president inviting ceos to the white house today to talk about the fiscal cliff. democrats could look to former presidential candidate mitt romney's tax plan in a hopes of reaching an agreement. we'll bring together both parties with former romney policy director, lanhee chen and ed rendell.
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>> the u.s. enterprise business is showing signs of life. is tech hot again? what about fears about europe? >> facebook shares are up as the social network faces its biggest test yet. 800 million shares set to hit the market today. what do investors need to know? a top ranked analyst is going to weigh in. >> breaking news here with scott cohen. >> i'm at the strategic growth conference in palm springs, california. a gathering of a couple thousand ceos and business leaders talking about challenges with the global economy and one of the topics of conversation is likely to be news we are just now getting out of washington. the obama administration signaling that it is expanding the multi-year crackdown on bribes paid by u.s. companies to foreign officials under the foreign corrupt practices act and the administration out with new guidelines, 120 pages. the act that's been in place
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since the carter administration is too vague and putting u.s. companies at a competitive disadvantage. so now the department of justice and the securities exchange commission out with 120 pages of guidelines talking about what is a bribe, who is a foreign official. we've put all of these guidelines on our website. cnbc.com. you can read more about it. this is again something that business leaders have been clamoring for but they want changes in the law. we'll see if the guidelines are enough to ease their concerns. back to you. >> thank you very much, scott. let's get to it then. the clock is ticking in d.c. today on the fiscal cliff. 1:30 obama will hold his first news conference from the election. he's clearly not negotiating from the middle and ceos will trek in for their 3:00 meeting. names heading that way, the ceo of dow chemical and brian sullivan is anchoring our coverage from d.c. where he joins us now. >> interesting what scott cohen said as well.
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the ceo of walmart will be here today. their mexican operation was engaged in some alleged issues in mexico. in all there will be 12 ceos today including the ones you just mentioned and they are pushing for a fiscal cliff resolution. that's going to be the key. if you listen to these ceos, they will tell you one to the man or woman, listen, this is hurting confidence. it's hurting our ability to spend money. it's hurting our ability to grow and grow the economy. and they want a fix of some kind as soon as possible. that's why 12 ceos are meeting with the president today. we expect the meeting around 2:30 p.m. eastern time. not sure how long the meeting will last. ceos will come out. that's why i'm here. i'll try to grab a few and get comments and what was said, did they reach any kind of conclusion on how to fix the fiscal cliff and are we any closer to getting this big problem, perhaps a trillion dollar problem finally put behind us, guys. >> it will be interesting to see how the news conference goes from obama before that. he's clearly hardening his
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position in asking for the revenue increases that we now learn he's asking for. he's not negotiating from the middle. as we look down this list, let's be honest with this, from an obama perspective emboldened by the election, a lot of people haven't paid a lot of corporation tax recently. a lot of them didn't vote for this man either and a lot of them actually have not created a huge number of american jobs over the last four years. i wonder if the tone will be different between them and obama when they sit down at 3:00. >> that's a good question, simon. the president has nothing to lose. he's won re-election. you don't have to play that political game. what's more interesting about the list maybe though is who is not on it. there is not one bank ceo on that list. lloyd blankfein of goldman is not in there. jamie dimon of jpmorgan chase is not in there. only thing close may be american express. no bank ceos and of course the president did meet with labor leaders yesterday ahead of corporations so the game continues. interesting to see what, if
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anything, comes out today. we'll find out. >> brian, look forward to seeing more of you later today. brian sullivan at the white house for us. for more on the discussions, we want to get perspective from both sides of the aisle. ed rendell, former democratic governor of pennsylvania and lanhee chen, former economic adviser to mitt romney. governor, is the president pressing his luck or is this what you do when you win an election? >> it's what you do when you win an election. in the long-term it's really needed. if we're going to do four or five trillion dollars of a debt deal, you have to have that level of revenue. i think we can have it. the meeting with the ceos is very important. as you know, judd gregg and i are co-chairs of the campaign to fix the debt. business has responded big-time. they've given over $35 million for a public relations campaign
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and business has to take the message to the republicans in congress that we're serious about this. this has to happen. it has to happen with significant revenue and that revenue not only comes from raising rates on the top 2%, but it comes from getting rid of a lot of loopholes. some plans with governor romney espoused during the campaign. >> there's a difference, governor, isn't there, between funding an organization that says get something done and funding an organization that says raise our taxes by a lot, right? they're not the same necessarily. >> it's not a lot. it's 4% on income earned over $250,000. that's not a lot of money for the americans that everyone talks about, family that makes $300,000 and has two kids in college. they are only paying that increased tax rate on the $50,000 above 250. people should understand that. >> lanhee, it's been said, wouldn't it be ironic if the whole thing came to a solution
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to what you said during the campaign. a basket of deductions. is that how you saw it come down? >> we were lookings ining at w promote economic growth. they're not talking about using some of the restrictions on deductions to lower rates. they are talking about raising rates on top of that. it's the last thing the economy needs right now. we need economic growth. we need a more efficient tax system. >> what about the governor -- it's hard to get to that number unless you move on rates too. >> i think that you got to look at the other side of the equation here. deficit reduction and spending restraint and entitlement reform and those are issues that have to be on the table. if we're going to do a big bargain here, it has to include fiscal discipline and entitlement reform. >> i agree with that. remember last year they did over a trillion dollars in spending cuts. and they got to build on that and there has to be entitlement reform.
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i agree on that. we also have to understand that raising rates on the top 2% as bill crystal said this weekend does not hurt the economy. bill clinton did it. we had six of the best years we've had in the last 60. >> it sounds like there's a bit of a yawn, a gap, between what crystal said on sunday and what rich trunka appeared to say or wanted to say yesterday outside of the white house. is it clear to you that labor and the left and moveon are being more rigid than some of the leading conservative thinkers? >> sure. and that's up to the president to manage that. if he gets the increase in rates or something very close to what he's asking for and gets substantial elimination of corporate loopholes and some individuals like romney plan, then we've got to go back to our base and say, yes, we've got to cut entitlements too because it's got to be part of a deal that has spending cuts at a significant level above the 1 trillion we've already done and
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revenue. look, unless we do 4 trillion to 5 trillion, we're not doing anything in my judgment that's particularly meaningful. >> walk me through the optics of what we'll see today. grover norquist last night said he thought ceos would be trained seals in front of the white house. does this mean anything until we get to the actual nuts and bolts of friday? >> no, i don't think it does. look, there's a lot of posturing and positioning. you had the president thanking his biggest supporters from his campaign yesterday. you're going to have a bunch of folks in today who certainly will make some good points to the president. ultimately this comes down to is this president willing to lead? is he ready to lead? is he ready to look for consensus? i think that's what the american people want. i do think obviously the president has the right to set the agenda but we've really got to come together and find a solution to this. the answer is not going over the cliff. we've got some substantial problems that will occur if we do. >> if the gop, if the house
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republicans do stand up to the president and push us over the fiscal cliff, what would that mean for the republican party? >> you know, look, i think ultimately there are two players in this negotiation. the president is one. republicans in congress are another. they have to come together. speaker boehner said he's willing to entertain more revenue. the president should take him up on that offer and they ought to come together and find some way through this. the republican party has got to take a good luook at what its future holds but a good start will be coming together to solve this problem. >> governor, nancy pelosi of course out this morning says she's going to run again for some leadership in the congress. is that a signal that the white house is going to remain more partisan perhaps than some hope? >> actually, i don't think so. you know, nancy pelosi was the one who produced the votes for the financial bailout. you all recall that. there weren't republican votes even when president bush
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proposed it and secretary paulson. nancy found the votes. nancy is good at finding the votes out of our progressive wing and the president will need votes from our progressive wing and nancy is a good person to do that. >> we'll see how things go down this afternoon and later in the week. governor, lanhee good to see you back. don't be a stranger. >> thanks for having me. >> brian shactman is at hq. >> iag got a downgrade today and the stock is getting thumped already at its average daily volume. 15% to the downside. one of the keys were costs were up because quality of gold they were mining was not as good as they had been in the past. back to you. >> thank you very much. it may not be bad news when it comes to the dreaded fiscal cliff. stick around to find out why indecision in d.c. could bring a big payday for some investors.
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>> and minutes out later today. a rough earnings season in the books and lots of volatility in the market. where should people put their money to work right now? we'll find out when tobias levkovich joins us after this. from thought to trade, on every screen. and all in real time. which makes it just like having your own trading floor, right at your fingertips. [ rodger ] at scottrade, seven dollar trades are just the start. try our easy-to-use scottrader streaming quotes. it's another reason more investors are saying... [ all ] i'm with scottrade.
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>> is investor anxiety over the looming fiscal cliff overblown? our next guest think so. in terms of how the market trades in the next month, couple months until something is figured out, we are going to be held hostage. >> to a certain degree that's correct. there's usually an event. we never know what those events are that will cause market turmoil. it could be news out of europe on greek debt for example. so fiscal cliff, which is huge, and everyone kind of thinks that the governmental officials will figure it out just in ugly fashion and we're going to watch it kind of work out every single day. i refer to it as we all like to eat sausage but we never want to see how it's made. it's the same idea here. the legislative process is ugly. having said that, the things that were worrying us about markets were two-fold. when we look at interest stock correlation top 50 names of the
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market cap in s&p doesn't matter energy stock, tech stock, financial stock, when they all trade the same it tells you there's enormous fear in the markets. everyone is reacting to macro events. a month or six weeks ago to drop down to 20% which people were complacent. we're around 25% complacency. despite talk about fiscal cliff, investors aren't trading stocks as if they're petrified of the fiscal cliff. the other thing we're concerned about is the surprise index for the u.s. the stocks tend to have a problem. you want it at the extreme inflection at the bottom turning up and that's where you want to buy and you don't want to chase that much when it's at the top. those are things i'm watching more carefully than just the discussion around the fiscal cliff. >> com it will catch up big-timd we'll see wild swings in the
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market. >> volatility is here. when the market got up and s&p up to 1450, we thought we were ahead and there were things to work out one of which was the election and other was the irrespective of who won was dealing with the fiscal cliff. if you were a romney fan and thought he would win and it would a pro-business view and after that we would settle down to say we still have this big issue december 31st. i think the winner wasn't as important. the process and i heard your prior interview being discussed is can they find that compromise and can the president lead and be able to take on both sides of the argument at the extremes. there's probably 80% agreement. it's the last 10% on either side that will be challenging. >> investors are paid to take risk. you have to come to a view as to what the likelihood is that you go off the cliff and what implications would be. it's perfectly logical to sit there and say this is important
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news and we follow it bit by bit, it's logical to sit at home and say i believe they will do a deal. i stay fully invested in the stock market. >> you may hedge the potential for the nasty outcome to occur. i don't know what statistical probability is. nobody knows that number. you should be invested. the question is should you have this kind of dispersion and willingness to buy a different kind of stocks when there is such a big macro event ahead of you. >> it's important to know what is factored into the market. bank of america had a note out a couple days ago where they felt already high capital gains taxes and higher dividend income were factored in and so we might get a year-end rally. that doesn't seem logical to me. we would have come down further if you were factoring in those very, very big changes. since w
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crisis of '08, '09, markets have stayed with relatively high risk premiums and multiples have been compressed as a result. i think that's probably -- i can't talk to the work specifically but i can certainly believe that there's always been this risk phenomenon in markets until there's broader clarity. if we do -- let's assume there's never earnings growth again. hold them flat forever and turn the market into annuity, probably about 94%, 95% of the market value is attributed to zero growth in earnings between now and eternity. that's very unusual circumstance but 90% probability that stocks are up 12 months later when you're in that kind of environment. i buy into the idea that a lot of these things are being discounted. the question is can we get out of our way and if you get the solution in the last couple weeks in december, markets would rally to some degree. it's hard to argue with that contention. >> so in terms of questioning
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where you want to be while all of this is going on, where do you have the most question marks? >> you know, the areas i'm most worried about are things that have exposure to europe. anything really cyclical tied to europe. european data continues to worsen. if you look at credit conditions in europe, they're worsening. ecb survey of lending standards continues to get bad. that's a good lead indicator of economic activity. europe may have another difficult year next year still in recession and in fact the forecast is that we do have a decline in gdp next year as well and some thought europe would suffer now and come back later. areas like autos, materials, industrials, particularly capital goods which have large cyclical expose to uure to eurou want to stay away. dividends are a dirty word right now because of issues here. even if you get taxed higher, you're still better off than if you're going to get hit in some other areas of income because the dividend yields are higher
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than bond yields today. >> right. for investors, these days maybe they think that way but in terms of whether or not i shift from a dividend paying stock which is paying you a dividend because the stock price appreciation isn't as great. traditionally in the past year that's not been the case. traditionally that's the case. do i go with dividend paying stock or stock with higher growth with no dividend under the circumstances of higher taxes on dividends. >> you barbell it. we like growth stocks over value stocks. margins like they're peaking, you want to be in growth. at the same time you are going to pay a premium for higher income levels you get in dividends. a lot of people have looked over the last 5, 10, 15 years saying i'm paying too much but the last time dividend yield were above treasury levels, you would talk 1950s. compare multiples today to '50,
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we have a legitimate debate. it generates two different outcomes and i don't know how you link them. people do but i don't think it makes sense. >> always good to see you. thank you for stopping by. >> breaking news on the oil markets. bertha coombs back at the nimax. >> oil spiking here this morning. there are reports out of israel that israel has conducted a military action killing a senior hamas leader. an air strike in the gaza area killed the head of the hamas military. one of the things a number of traders heard about that earlier but one thing is an israeli military spokesman says this is the start of a broader operation. so that is one of the things. it seems to have the market a little bit on edge and has them bidding up oil at this hour. the one trader i talked to said between the tensions between israel and hamas if we'll see that spiking up obviously israel and syria over the last few weeks, that's better than israel and iran. back to you.
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>> that's true. bertha, thank you very much for that. congratulations if you are hold cisco shares coming into this session. they are experiencing a good bump on last night's results. we'll talk about what they are doing right and whether risks lie ahead next on the program and who would be affected the most if we go over the fiscal cliff? we'll get up close and personal with the cliff and as we head toward the break, another fiscal cliff fact. >> if lawmakers fail to agree on a plan to avoid the fiscal cliff, increasing tax rates on high income taxpayers will result in over 39,000 jobs lost in florida, 27,000 in ohio, and 76,000 in california. those little things still get you. for you, life's about her.
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>> people are making serious money trading the yen today. good morning. huge news out of japan overnight. not only is the prime minister suggesting there could be a snap election but the guy that could win it would tell the bank of japan to just keep printing almost indefinitely. is the yen a one-way bet here?
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>> definitely some good downside opportunity in the yen. not only is the guy saying that the boj needs an inflation target but he's a former prime minister. i think there's a lot of support behind him right now. and given that we're going to have a date for the election, which is going to be on d dissolution of the lower house on friday, i think political uncertainty combined with economic turmoil in japan means the bank of japan not only could ease monetary policy but move to this inflation target that ldp leader is calling for. >> from 1% to 3%? so you just keep printing until you get to 3% which they will get to. >> it's not very clear one-way trade. we have u.s. fiscal cliff overriding dollar/yen. a short-term opportunity here. >> what are levels? >> i'm looking to come in with a slight dip at 7,980 with stock at 7,920 and target of 80.75.
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this is a short trade. the reason for that is because while i'm bearish japan, yen will head lower. i'm also worried about the fiscal cliff. i think that mr. is some upside but we have to keep our targets and stocks tight. >> have a great evening. thank you. for more currency trades, be sure to catch "money in motion currency trading" on fridays at 5:30 with melissa. >> short of the yen. short of the yen. >> thanks, simon. facebook gaining more friends this morning as more than 800 million shares come to market in today's big lockup expiration. we'll sort through the social network's biggest test yet and find out what that means for investors. from local communities to local businesses.
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dow is down almost 50 points. some of the stories we're squawking about, 7:32 on the west coast, 10:32 on wall street. shares of facebook are up as lockup provisions of 800 million shares expire. avon products and big lots are moving to 52-week lows and
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business inventories up 0.7%. >> cisco systems a big earnings mover this morning. shares up 6% on better than expected first quarter results. you have a buy rating on cisco. $23 price target. as many analysts have evaluated cisco's quarter, you think it was a good quarter here. how did you earn john chambers guidance on the current quarter? do you think that he just short of is being typically conservative as he has been in the past? >> yeah. i think he is. the thing to keep in mind is the public sector views weak concerns with the fiscal cliff, et cetera, and also europe is weak but what's interesting is that carrier spending not just here in the u.s. but elsewhere driven by smartphone growth, tablet growth, that looks like it is more than offsetting weakness in public sector and
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europe. we think guidance is prudent. >> can it continue to do so? can there continue to be offsets of steep declines with no promise of turning around. if we believe the prediction that europe will guest worse before it gets better, that 10% decline we saw in europe in the routing and switching business, that would actually get worse before we see any turnaround and can other offsets be in place to continue to offset? >> yeah. what's interesting with europe, you have to look at it terms of two pieces. the piece obviously not doing well is enterprise. you see pressure there. even on the service writer side where there is smartphone growth and talent growth, that's holding up better and that side is even with europe the problems that we have is seeing signs of recovery. so we think that could ironically be what could make
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europe better. >> you got to take your hat off to chambers. thousands of job losses. he speeded up the decision making process. he's cutting prices against the competition. it's a phenomenal effort. how sustainable, therefore, is this margin increase of 106 basis points in that environment where you have deflation and prices and clearly the competition getting more intense in many senses. >> well, you know, the cisco is definitely out executing the competition and they are taking share like you say and i think the thing that gives us comfort in terms of why this is so much sustainable is that they're doing this under very difficult situations. we believe there is still more room in terms of cutting the -- it's not necessarily head count related but cutting costs of products themselves, right? and the other thing is that cisco as chambers said on the conference call, they are more
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of a complete solution provider instead of just networking here, they are becoming more complete solutions provider and we think that perception and reality from customers is going to help them do better than others. >> if we are to believe that cisco is on a turnaround path akin to that of apple and ibm in the past, should we actually be selling shares of juniper today? we are seeing shares rise in conjunction on back of earnings but is it that cisco is getting stronger to detriment of competitors? >> it's interesting that cisco's strong results are lifting the whole market but their success is more likely share gains against companies like juniper. i also think against hp and del. cisco's server business did quite well. they are not just selling networking gear, they are selling the whole solution so we
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think that -- we're still cautious on names like dell and hp. >> good to speak with you. >> we have some breaking news here on john mcafee. we'll go back to cnbc headquarters. >> belize police tell me that john mcafee is not a prime suspect in this murder. mcafee is just a person of interest. this distinction is very important. they tell me they have no evidence linking him to this crime as of yet. they haven't even recovered the bullets from the body of the victim. they are simply interviewing everyone who lives near the victims. mcafee was a neighbor of this american victim who was killed over the weekend. mcafee has had a dispute with this neighbor over mcafee's dogs but police say they have no evidence linking him to this crime. they just want to talk to him as they are to every neighbor of this victim to see what he
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knows. as they tell me "we don't know why mcafee is in hiding or what he's afade of. we just want to ask him if he knows anything about this." mcafee says he's afraid of the police and trying to shake him down for money. they raided his compound back in april and some reports say they found illicit drugs and unlicensed weapons and in fact the police tell me there were no charges brought after that raid. mcafee called us last night and said he's being accused of something he didn't do and fears for his safety and is moving every four hours. police tell us mcafee can come to the police any way he wants. lawyers, bodyguards, take cameras. the police don't know why he's avoiding them. back to you guys. >> wow. all right. this story continues, robert. maybe you can actually broker some sort of agreement there given that our producer and you
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are in touch with all of the parties. >> we get a cnbc cameras with him when he turns himself into police so he knows he's safe. police get what they want in terms of questioning. we can get to the bottom this murder. i think that's a perfect solution. >> all right. let's stay on it. robert frank back at hq. >> yesterday he attended president obama's labor meeting on the fiscal cliff. today we'll get his scoop when dennis van roekel joins us later on. again? it's embarrassing it's embarrassing! we can see you carl. we can totally see you. come on you're better than this...all that prowling around. yeah, you're the king of the jungle. have you thought about going vegan carl? hahaha!! you know folks who save hundreds of dollars by switching to geico sure are happy. how happy are they jimmy? happier than antelope with night-vision goggles. nice! get happy. get geico. fifteen minutes could save you fifteen percent or more.
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what will the fiscal cliff mean for your mortgage interest deduction? will people still buy homes without it? diana olick has more. >> this is one of the most popular and well known tax breaks in america and for some it's a real incentive to buy a
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home. with now several proposals in play, we want to look at what we may be losing. as deduction stands now and it only applies to you if you itemize. for those making less than $40,000 a year, the average savings is 100 bucks in taxes. less than a quarter of folks in that itbracket itemize any way. for those earning $250,000, average savings 1,500 bucks a year. for those making more than $250,000, you bump that up to $5,400 a year. cap the deduction at $500,000 of the home value only for primary residen residences. down from a million. another is to limit it to just $25,000 worth of mortgage interest. another, only eliminate the deduction for taxpayers in the 250 k or higher income bracket. limit the total amount of all of
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the deductions by anyone to $25,000. that was mitt romney's plan. it's starting to get traction with democrats. you could end the benefit on second homes and vacation properties or you could eliminate the whole thing all together. obviously the realtors, home builders, anybody making money off housing is opposed to changing this deduction at all. jerry howard, ceo of home builders association, says even the debate is "chilling the market." gary thomas, president over at national association of realtors says the mortgage interest deduction is vital to the stability of the american housing market and the economy. now, whatever cut is adopted, if it's adopted, it would hit those hardest who are at the beginning of a big mortgage and therefore are paying the most in interest. that's how mortgages work. and that is big because so many people have recently refinanced so they are all at the beginning. this one is going to be really interesting. simon? >> thank you very much for that
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diana. scary. >> interesting. >> thank you very much. we were talking about -- have you seen the tax breaks going on flexible spending accounts. have you done open enrollment? >> yes. that's part of the affordable care act. it's gone from 5,000 for flexible spending account to -- 2,500. that's right. it was a surprise. >> it was. coming up next, the biggest test yet for facebook as nearly 800 million shares come to market on its largest lockup expiration to date. shares soaring this morning. could this mark a turning point for the stock. a top ranked analyst weighs in. first, rick santelli, what are you working on for the next big hour of "squawk on the street"? >> come on, you know what we're going to work on. maybe every day for a while. different aspects of the fiscal cliff. today, well, there was a great song. "wild thing." i'm going to talk about how that song and pacman could give you clues of what's coming around to
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solve or not solve the fiscal cliff. you have to tune in at the top of hour to get those two on the same page.
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>> shares of facebook surging today as 800 million extra shares are unlocked and available to trade from insiders. the biggest increase in the number of shares free for trading since the company went public in may. shares currently trading at $21.59. a gain of almost 9%. rich greenfield is co-head of research. he has a sell rating and a $16 price target. wow. you must be surprised with today's move. >> there has been aot of focus around unlock dates since this company went public. the stock is down sharply from where it went public. the issue of why you want to be short this stock and why we tell clients to sell facebook at these levels is where we started our sell rating a month ago is really because of the challenge of mobile. it's not about the lockup.
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it's not about technical events. it's really as the world shifts to mobile devices, our sponsored stories and ads you see on facebook when you're on your mobile device is that enough to support current valuation? not so much today but future growth prospects and that's where we really struggle as facebook has really amped up the push of advertising since the ipo. >> that's a discussion that we've had many, many times on this particular program. however, when you see a move like this today, i am assuming that's people covering shorts. they thought that the stock would fall. they thought that it would go lower. ultimately ultimately it hasn't today so they're covering. is that -- how would you read -- >> i think it's very hard to read into the technical events of how an unlocked day works. we've seen a lot of mechanics in recent unlocks that have been, what i would call unusual or surprising. the reality is the challenge for facebook is, people are assuming this company can continue to
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grow 25%, 35% top line growth over the next several years. when you look at the advertising products coming out and the number of players that are competing -- remember, facebook doesn't control your device. they don't have the operating system. the operating system on mobile are really two companies. one is google with android and the other is apple with ios. those are the companies that really know everything about you. and then you have new players like square that actually understand everything that you're purchasing and are trying to be that local commerce player and move into advertising. facebook is trying to go, hey, you like a lot of brands, your friends like a lot of brands and target you based on that. the question is, do they have the best data to support -- >> rich, facebook seems to be confronted with a potential problem is that it doesn't fall nicely into any one bucket for investors. it's not a growth stock unless you're believing projections well into the future and it may not be considered a value stock
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at these valuations. in order to become a value stock, what price would it have to be? >> we think in order for this to be at a more interesting valuation it would have to be more the midteens. a $16 price target which we think is acceptable expecting the growth in 2014 and '15. the question you're highlighting, a company that went public with a social mission. mark zuckerberg was very vocal in saying, he wants to connect the world and having the connection between the world benefit consumers. yet what we've seen is the company is pushing on monetization. we're seeing companies offered -- companies like walmart being offered to leverage facebook. we're seeing them push really hard for "likes." more like ad spam.
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are the growth rates believable and at what point does it become a value stock? i don't think you're at value at $21, $22. if this drops substantially maybe we have a different discussion in six months. but at these levels the question, can it justify its growth rate? we're struggling to believe that how they're pushing advertising and advise investors to be selling at these levels not buying. >> rich, thank you very much. rich greenfield joining us. we had two bulls on facebook who thought it would rise substantially and a bear. still to come the fiscal cliff and your taxes. find how much they could go up if we go over that cliff. later, yesterday he sat down with president obama and other labor leaders. today he sits down with national education association dennis van roekel joins us to talk about the cliff. i have a cold... i took dayquil,
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f we go over the fiscal cliff, how could it affected taxes for everyone? the answer is different groups will be affected very differently. steve liesman has more on the numbers. >> what we do know is if we go over the cliff, no change in what is mandated by those rules.
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everybody will pay more. we've divided up the country into quintiles, one-fifth, one-fifth, one-fifth. here's what happens with the cliff. for the lowest they go up by 3.7%, second 4.1%. if you're in the middle, where most people are, up 3.8% all the way to the top, 5.8%. what about the top 1%? their numbers go up by 7.2%. here's a way to think about it. this is what thelma and louise would pay extra if they went over the cliff. here's what mr. thurston howell would pay if they went over the cliff. let's take a look at the actual dollar values beyond percentage points. we know we have health care law taking effect and that will only affect the top fifth. here's your dollar values for the income bracket ets is. add on the amt, when they
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expire, get rid of the bush tax cuts. for the wealthy, a big chunk. it goes down to the second quintile. we get rid of some payroll tax cuts. down the line f you zoom in, those in the lowest are affected right there. finally, the last bit, some other recovery act measures that come on. here are your numbers. up 400 bucks for those who are less than $20,000. up $1200 less than $40,000. if you make less than $108,000, right at $3,000 plus. $14,000 for those in $108,000 up to the very top. we take a special look at those at the very top. watch what happens to this graph as it collapses down. there's your $14,000. this is for the top 1%. again, mrs. thurston howell over here. $120,000 plus for the top 1%. that goes from $380,000 up to guys who make $200,000, and
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women, who make $400,000 or $1 billion. that's the average tax rate for that group. you see they pay a big chunk but over a wide spectrum. by the way, the total tax bill will be $500 billion added. that doesn't take into account for the decline in spending that will happen as well. not really clear what happens to small business. we don't really know the percent of small business making more than $250,000. the white house says it can be between 1.5% to 3%. the federal reserve has a study out that shows 11.4% or over 2 million businesses have incomes greater than $250,000. some effect on small business. we're not sure what. guys, back to you. >> steve, it's david. first of all, i compliment your use of color. love the purple, very pretty at the top there. you look at that chart. i mean, that's progressive taxation at its finest -- at its
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most extreme, it would seem. >> it is. >> i wonder if those who believe taxes need to go up on the wealthy whether they embrace that and say, let's go over the cliff. you say half a trillion if you get to spending cuts, i mean, those worried about deficit reduction have to say, well, that will certainly help. >> it will help. two pieces to that, increase of taxes on the wealthy in a progressive manner, as you noted but also increasing for everybody so it's broadening the base, which is what republicans want. in that regard going over the cliff has a compromise element to it. >> i'm still thinking about lovie, we're going to be paying more in taxes, the gilligan's island reference from steve banks. >> tonight? >> why the markets may not be having trouble. >> and dan o'keefe. >> yes. >> let's get to the third hour of "squawk on the street." here's what you missed earlier on this morning. welcome to hour three of "squawk on the street." here's what's happening so far.
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>> i think you're going to see some back and forth and the question is, how much revenue can you get from closing deductions and loopholes? if so, what kind? do rates need to rise in order to get the revenue you need to make a deal? >> i think the stakes are lower, as frustrating as it is, the ultimate stakes are lower. $50 billion a month -- >> it's not a cliff, it's a slope. >> everything comes into play. i think the market fever breaks after a couple of days. >> i cannot get into a discussion where it says itsd great if we jump off the fiscal cliff given the data we come up with what happens, the "usa today" article. people who say that as a way to teach america a lesson. 50 technology companies rushed to europe. i think you'll see q1, companies saying, look, we have maintained and cordoned off our european. don't worry about european. if they don't say it, i think we'll sell the stocks. >> opening bell.
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>> raising rates on the top 2%, as bill kristol said this weekend, does not hurt the economy. bill clinton did it and we had the best six years in the last 60. >> people think governmental officials will figure it out in an ugly fashion and we'll watch it kind of work out every single day. i've heard of it as, we all like to eat sausage but we don't want to see how it's made. >> good morning. we are live at new york stock exchange looking at another mid-morning fade. dow started with modest gains, currently down. the s&p down 8. nasdaq has 3. 9. on october 5th, the high for the year, the october high, we had an 11% gain for the year. we've lost a lot of ground and are losing more. cisco today, one of the biggest
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movers, up sharply after surprising the street with better than expected first quarter results, in line guidance, tighter cost controls and bigger sales growth. reuters first reporting advanced micro, amd saying it is not actively pursuing a sale of the company or a significant sale of assets. let's get to the road map today. facebook spiking on the day of its third and largest lock-up expiration with roughly 800 million shares hitting the market. we'll get the inside story on the expiration from facebook itself. the president of the national education association who spent yesterday talking to the president about the fiscal cliff will join us live, tell us why fixing the cliff is so important to education. then missouri senator roy blunt tells us what he wants to hear from the president this afternoon when it comes to the cliff. can cob congress rise above partisanship and get it done? and the man who sees innovation,
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peter demontis is here with a look at this year's break-through ideas that could solve some of the world's biggest problems. we'll start with retail. abercrombie & fitch with third quarter results, raising outlook for the year. stocks surging on the news, although heavily shorted. courtney reagan. >> every indication pointed to expectations for another disappointing quarter for abercrombie & fitch. surprising nearly everyone but leaving many with some questions. for the third quarter abercrombie earned 87 cents, soaring past 59 cents expected by the street on stronger than expected revenues of 1.1 billion. they say most came from lower expenses. the company guiding full year earnings at robust $2.85 to $3 a share, blowing past the street's
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expectations for 48 cents. now, europe is a particularly important geography to the teen retailer. the debt crisis hasn't helped the past year. all signs pointed to another weak sales quarter for international, sales grew 37%. however, same store sales did fall 3%. that's a sharp improvement from last quarter's 26% plunge. ceo mike jeffries notes, our u.s. chain store business posted healthy growth on top of strong quarter a year ago and we saw a trend improvement in international business. the question is whether it's a one-off anomaly type quarter origining of renewed strength for teen retailer. the shorts are covering and others are jumping in, too. shares up almost 27%. carl? >> what's amazing, it just gets us back to where we were a couple months ago. incredible story. facebook a big mover. stock breaking previous patterns and actually jumping on its third lock-up expiration.
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julia has been on the phone with analysts with details about why it's different this time. >> good morning. today is the biggest lock-up expiration for facebook shares. over 80 million a0 million are e market. it it means institutional investors, former employees and investors who bought on the secondary market, and another 31 million in restricted stock units owned by employees who owned prior to 2011. the stock today is soaring for a couple of reasons. the fact that investors are holding on is resuring the market which did see the stock dip after prior lock-up expirations. some big investors who can sell? this round are expected to have bought in at a higher price so it makes sense they to want hold on for the opportunity to sell their shares at a profit. we have seen short interest on the decline, leading up into this lock-up exspir rags. the number of share borrowed was down by 40% in the first half of
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november. and today we're likely seeing some short covering. facebook has been gaining momentum in the key mobile area. its october 23rd earnings release showed growing mobile revenue and return to accelerating growth in advertising. facebook has not disclosed any plans to buy shares on the open market, so the company is not responsible for the jump today. we should remember that mark zuckerberg, ceo, said he had no plans to sell his big stake in the company and mark andree son and donald graham said they're only selling as much as they need to to cover their taxes. that's been so much attention on these lock-up periods. employees could sell so now there seems to be kind of a big sigh of relief. back to you. >> with yelp not too long ago, additional proof this can be done. a lot of shares coming to market and yet the price rises. thanks, julia. gary komco kaminski has tho.
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>> i was just standing in central park now i'm on top of a building. magic of tv. julia talked about facebook. i've been working on putting some data together. i hope to bring it to you maybe next week but i want to sort of let people know, i think this is what is happening right now with facebook. it's very simple. we talk about the closet indexes all the time. we talk about the benchmark huggers. in fact, the fact that facebook is not owned by closet indexers has put a lot of people in the mind set of wanting to own this stock into the end of the year for the simple reason it is not overowned. it not owned by these people. not accumulated. only 31% of shares are institutionally owned. you compare that to other closet indexers. here's your largest institutional holders. not the typical closet index names. you know back on october 1st we pointed out what was happening with apple. a name where all the closet indexers got essentially nasdaq market weighted. here's the interesting thing. we know apple has declined since
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then. if you look at the data, apple at that point -- at that point apple was about 12% of the nasdaq, of the nasdaq total weighting. down to 9.7%, down given the declines. here's some interesting stuff. take a look at some of the larger funds in terms of the october 1st data, the new data where they are. we have fidelity. now insight fund. you'll see that essentially the names that had owned this in a very large percentage continue to own it. a month later. we looked at september 30th data. now starting to filter through october 1st data in terms of mutual funds. apple has technically bottomed. on the technical basis the stock has found a bottom. it probably could trade up to 580 to 620. guys that were underweighted now are overweighted. they'll use any significant lift here to probably get back to a market weight or an underweight given the relative performance that has hurt them. it's important to understand, closet indexers are the
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incremental buyers. they are always the incremental buyers. paying attention to them in a facebook or apple, that's how you stay ahead of the trend, so to speak. by the way, carl, before i throw it back to you, i see the market close to the lows of the day. at the bottom of the hour, a pattern people are paying attention to. it's been in place for two weeks. before the election, into the election, post election. i'll explain what's happening with the stock market because i think there's a very strong pattern here. why we're probably seeing the action we are today. >> yeah, as we said at the top, another mid-morning fade. that thesis you've been hitting on regarding closet indexing is just incredible, gary. has not led us astray yet. >> no, it has not. >> thank you. biggest drag on market is from materials. brian shactman. >> taking a look at mosaic late yesterday they gave guidance and it was weak saying the international market and demand is soft. this morning they got a downgrade at canaccord, negative
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on the whole sector. down 3.5% and now negative for the year. one thing i'll point out, another downgrade in the group but canaccord still lee gate on that name. let's get to the cme with rick santelli as things continue to heat up in washington. good morning. >> good morning, carl. and they do. let's try to be objective. we're all wearing our pins. here it is. i keep losing them, but here it is. in order to have a real compromise, of course, both sides have to have an equal footing in giving something. now, what i see as the major dynamic now, this is just my opinion, and i spoke about it last week, and we talked about it, carl, is the market. wild thing. if we make the market wild, we're going to get a much quicker resolution to the fiscal cliff. but the issue i have with that is it's easy to get the market wild and it's easier to get the market wild based on the power
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in washington. washington and taxes is a very easy way. think about little sound bites and little things that can come out of d.c. that could put a boiling type temperature to the marketplace. similar to that t.a.r.p. vote. and the reason this is not a good thing, and i'll go back to that old abbott and costello play, who's on first? when we talk about the fiscal cliff, obviously there's a chronology to it. what happens on december 31st? taxes are changing. but does that mean entitlement programs, something magic happens at midnight on december 31st? no. and that's why it's very difficult for me to see a compromise. because the republicans are going to have to blink way earlier on the taxes, or compromise there, than anything going on with entitlement. here's the issue. it's like pacman. but pacman isn't eating little power dots.
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you know what pacman is eating? dollars. in this analogy, pacman are the entitlements. i'll tell you what, this is an issue. because while in the debates and all the commercials, pre-election and even now, this is what the big gorilla in the room is. we could collect boat loads more taxes. we could take everybody's money in taxes. it isn't going to keep up with this hungry pacman. so, if we're going to compromise with this press conference on friday, i would like to see the media ask an equal amount of questions as to put your entitlement chips on the table. that's the way you come up with compromise. back to you. >> all right, a good piece in the "times" today all about how the president, to some degree, has already agreed to all sorts of entitlement cuts but we don't know anything until we get to the real discussion. >> oh, yeah. and all the things we haven't known about in the past, behind room hand shakes, big deals that
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were almost consummated. where i come from, put it on a piece of paper, then it's a deal. what happened in a closed room, that's for baseball scouts. back to you. >> thanks a lot. meantime he pledged his support to the president when he met with him about the fiscal cliff yesterday. now dennis van roekel, president of the national education association, will join us live, tell us all about that meeting, what it was like being in the room and how the country might be impacted by the cliff. while labor leaders and ceos promise to work with the president, will congress? senator roy blunt joins us later on. back after a break. if lawmakers fail to create a plan to avoid the physician kaf cliff by january 1st, federal work study will be cut by over $76 million. and over 51,000 fewer students would receive aid.
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today's white house meeting with ceos, the president said he would push for his campaign pledge of making the wealthiest pay more taxes. dennis van roekel, he attended yesterday's meeting with the president. he joins us from washington today. good morning. good to have you. >> good morning. good to be here. >> we always say we wish we were a fly in the room. you were in the room. what was it like? >> it was a good meeting. there were a lot of issues brought forward, interests identified and the challenges identified. the bad news for education is
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that nothing is done. there will be an 8.2% across the board cut. $4.8 billion, impacting 9 million students, and the loss of 78,400 jobs, which will further raise class size and eliminate needed programs for students. but there is a way through this. we're looking at a $1.2 trillion problem. the president is committed to eliminating the 2% tax cut for the wealthiest -- tax cut for the wealthiest 2% of americans. that's $827 billion. if we bring fairness to the tax code, to those people who earn income by work and comparing it to those who earn income through wealth f we equal lies that we can bring in another $233 billion and solve this problem. as warren buffett said, it makes no sense that his secretary pays a higher percent of tax on her income than he does. we need to correct that. >> believe me. we've talked a lot about
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buffett's secretary. here's what you told "the washington post." everybody in that room worked regard for the reelection of president obama so there was a good feeling in the room from the moment we walked in until we left. i'm not hearing any give. this sounds like we helped you get into office and now it's time you pay us back. >> no, it wasn't that at all. you know, it was the first of three meetings, as you mentioned. labor leaders and progressive groups yesterday. business today. congressional leaders tomorrow. i think it's really important that the president is doing this. he's providing real leadership. congress needs that. and they need to realize that the 535 people there in the house and the senate, they need to do what's not what's right for the american people, 360 million, not right for them. there is a way through this and i think the president will provide the leadership needed. >> if leadership involves bringing both sides together, each side giving something up, what would you say the nea is prepared to give up that maybe they weren't last year?
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>> well, a year ago we had $1.7 billion of cuts. they have already given much. with zero amount of revenue raised. now it's time to bring the fairness to it. this election wasn't just about who was elected, but the ideas and values that the american people grab onto. that has to do with fairness. the 2% -- or wealthiest 2%, they need to pay their fair share. there are other simple solutions that allow the benefits to continue to those in social security, medicare and medicaid. that's essential. >> i assume you're referring to, i guess, more stringent measures of inflation whether it comes to social security or this notion about raising the retirement age on medicare to 67 or the eligibility age. are those things, do you think, fairly on the table at this point or did labor yesterday say we don't want to hear anything about those? >> well, social security is quite secure for the next 20 to 22 years. i don't think that will be so much in the discussion. medicare we need to look at in
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the long term but we don't need to impact the benefits of current recipients. in medicare it's important we do that right. medicaid insures one-third of all american children. the other thing is if congress sends much of the burden of medicaid back to the states, states will be in a very difficult situation. medicaid is already their number one highest percentage of budget, k-12 is second. if forced to spend much more on medicaid, we know that k-12 education will be hurt and they have been hurt immensely over the last four years. we can't afford that. today students deserve better. >> hope you'll come back as the debate continues. thanks so much for your time. >> you bet. i'll be glad to be back. >> dennis van roekel from the nea. when we come back, senator roy blunt, member of senate appropriations committee will get his take on the fiscal cliff ahead of the president's comments.
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welcome back to the third hour of "squawk on the street." i have a special guest today, harry clark of capital management firm that bears his name. welcome, mr. clark. >> how are you today? >> very good. now, i don't think we're on the same side of the page exactly. you pretty much think the 30-year bull market in treasuries is over. i don't totally disagree. i just think the last couple of laps can be pretty fun. let's go with your scenario. many people out there, viewers on the radio and watching, that are nervous about being invested in bond funds. you think they have pretty good reasons to be nervous. tell us the dynamics of what happens when rates move up in bond fund performance. >> if rates move up by only 1%, rick, a 30-year bond drops by 20%.
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a ten-year bond by 10. a three-year bond by three. have you to go shorter than the bond fund allow you to to prevent that from happening. i agree with you, the bond market isn't going to fall apart tomorrow or forever but we're in the foot hills. >> i totally agree. let's stay at that intersection. if there's wick wild upside left -- before before the tech wreck in 2000 we almost saw a doubling of the nasdaq. if you still want to try to capture some upside in interest rates, lower rates, higher price, should investors just buy the actual instrument and hold it to maturity or is there a way to protect their positions in their bond funds? >> well, there's way to protect the position by just buying short duration stuff or there are some etfs that go inverse the price of bonds. if bonds go down, the etfs go up. a way to protect yourself is
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maybe a small piece of that. rick, let's face facts. the bull market in bonds is almost over, if not all the way over. a new bull market stocks is on the horizon some day down the road, and there's been four times this century we've had these long-term secular trading ranges. they've always ended with an inflexion point in bonds. this will end when bond inflexions head up in yield. it's happened three times in the past. this will be the fourth time. you don't want to be in bonds when that happens. you want to be in high-grade, high corporate stocks with good dividends. >> now, everybody seems to be jumping in the muni camp. obviously, fiscal cliff tax issues moving them there. you have any thoughts on muni funds with the same notion they may be on borrowed time as well. the fiscal cliff may be solved and interest rates, as you say, may indeed go up. >> true. munis are a whole different story. they'll suffer but not as much
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because of the tax-free nature. if you buy them by themselves, they'll mature. bond funds have no maturity and therein lies the problem. >> thank you, mr. clark. to summarize, go short duration if you're in a fund and try to hedge it with an etf. carl, back to you. >> good advice. european close coming up after a break. don't go away. future. since ameriprise financial was founded back in 1894, they've been committed to putting clients first. helping generations through tough times. good times. never taking a bailout. there when you need them. helping millions of americans over the centuries. the strength of a global financial leader. the heart of a one-to-one relationship. together for your future. ♪
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the european markets are closing now. >> not only a sea of red, simon, but a lot of data out of europe that wasn't encouraging either. >> that's true. for many in financial markets, also the turmoil you see on the streets is a main focus. let me show you. millions of people on strike across europe from port gull to spain to italy. there were clashes, over 80 arrested in madrid. plastic bullets also used in spain. as carl dates, the data gets poorer and poorer. 2.5% down in one month, not an annualized figure. this is of greater importance to you as an american investor. thousands of miles away in asia, christine lagarde, head of the imf, continued in a speech today, her standoff against the other members of the european union. when she suggested there had to be a real solution for greece.
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in other words, she's telling the rest of europe, it needs to take carecuts on the loans it has given greece. germany will not do that. the question is, for how long will the imf hang in there, funding the bailouts and being part of the bailouts? the analysis we have at the moment is that they will for now. but we need to watch it. it is potentially extremely important, this standoff lagarde has created. meantime, back to the markets. headline driven in this environment. yesterday you saw the sharp rally toward the end of the session. was it because of the rumor that spain might have a bailout or was it the rumor that potentially they were bundled 44 million euros together for greece? i don't know. it clearly moved the market, both of those things incidentally didn't happen. longer term, if you look at what is happening, europe versus the united states, you can see the effect of the fiscal cliff in the wake of the obama victory. here you see the yellow line here is the top 50 blue chips in europe. how they have traded over the
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last month. this is the dow jones industrial average. you'll see that under performance now, 4.5% as a result arguably of that fiscal cliff and arguably where the election left us. >> it's going to get tougher sledding. meantime other capital markets op-ed, gary is looking although a few charts as he did yesterday. >> you know, carl, great piece by riches warning people about bond funds versus bonds. a lot of people ignore that stuff. a lot of people ignore techni l technica technicals. warn buffet will tell you he doesn't care about that. let me tell you this f you don't pay attention to closet indecks, duration on bond funds and you only one to blame when something happens and you're not paying attention. we've showed you the ones making the rounds. this has been making the rounds called the bernanke bull market symmetry. take a look at this. a colorful picture.
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essentially this says you go back to all of qe, see the bands here right now. if you don't want to respect the technicals, that's your choice. but this is a chart that's been going around. it basically shows you we've tested the upper limits. if you believe in symmetry here, we'll start to test the lower limits. now, last week -- or maybe a couple days ago, we showed you this chart comparing 1987 to 2012. in terms of the stock market crash. now, take a look at this chart right here. chris carolyn forwarded this to us. this is a chart on the opposite side of what we showed you the other day. basically, chris is an award-winning technician. back in 1998 he wrote the pivotal paper in terms of autumn correction. his point is you've already had the correction. you've already had the 2012 correction. he sees this now -- he's bearish but he believes the correction we would have had seasonally has already taken place. just another different viewpoint. now, i want to talk about what i
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think has been happening the last three weeks. there is a pattern in place, carl, you and i discuss it up there, which is at 11:30 close of europe has typically been the high of the day. there's been a point where you've had people saying it was related to europe and some people saying it's not. yesterday was a perfect example. the high today around 11:30, up about 65 on the dow, reversed 120 points. i want to tell you, people are trying to game the system. those that trade it, enough people have pointed out to me, and i think today what you saw was in preparation for 11:30 close, you saw people shorting into that, expecting this pattern will continue. guess what? when everybody positions themselves for the same thing, it does not work. so, in fact, if i had to be a betting man, i'd say today 11:30 was not the high of the day, probably the low of the day because too many people are trying to game that system. >> isn't that interesting. we are off the lows, not by much, but we'll see if your
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theory holds true come close. great stuff. great charts, gary. i want to get to some breaking news regarding target. >> carl, take a look at shares of target. 13f filings throughout the day, first from farallon capital. sold nearly 1.7 million stake in target, a move down fairly precisely. you can see the time that crossed. the stake was worth around $98 million. farallon selling entire 1.69 million share stake in target. >> thank you for that. bob pisani is here at the exchange. it hasn't all been corporate news that's moved the market. >> no, we have some international news. usual concerns about the fiscal cliff that's weighing on things. we don't have a resolution. friday is when the real debates, the real discussions again because that's when the president will be meeting with congressional leaders. right at the open we got word that israel had killed a top hamas leader. that popped up on a lot of
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trading desks. that was a significant strike and a significant retaliatory commentary coming from hamas. i think that was a factor in the weakness here, in addition to the weakness of the concerns with the fiscal cliff. let me move on and show you, we've had some damage here in the last few weeks. gary is absolutely right. the dow has dropped 1,000 points in the last several weeks. i don't know if you realize that. here was our five-year high, october 5th, 13661. we hit 12,662 this morning. we're off of that. that's 1,000 points drop in the dow. that's about 7.5%. all right. it's not 10%. but that's a pretty noticeable decline we've seen. so far for the year we're getting close here. the dow is up 3.8% on the year. i know the s&p is doing better. the s&p is up 8%, 8.5%, something like that. that's not a huge move up. look how much we've lost recently here in the dow industrials. the reason the dow is only up
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3.8% and the s&p is up 9%, is we've had big damage in the tech names and global industrials. i know everybody wants to talk about how great home depot is. that's a dow component and walmart, another dow component. look what's happened in the big, big tech names. hewlett down 10%. caterpillar is down 9%. alcoa is not here but down 6% or 7%. all big industrial names have had a hit. the dow has underperformed the s&p 500 because of the weighting here in some big tech and big industrial names. another sector that's weak today are the home building stocks. hope you were listening to diana talk about the concerns about the mortgage interest deduction. folks, this is as old as the earth almost. dy these stories 20 years ago when i was the home reporter, real estate reporter. they're back again. home mortgage deduction, you see home builders, it's one of the
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oldest deduction that exists. it's 100 years old. you could deduct back in 1913. here's my take on what's going to happen. this is an old story. i did this 20 years ago. first talk about eliminating second home deduction. that may likely happen. next thing they'll talk about is capping mortgage interest deduction at primary home at about $500,000. this is just me talking. i think that would affect homes in california, new york and massachusetts. that's probably where this will go. i'm not sure it will get that far but that's what you'll hear talked about in the next couple of weeks. >> you think the second home mortgage interest maybe goes away? >> i think that's going very quickly. if i was working in the building industry, i'd give that up and argue, don't change that. but even at $500,000 it's only a small percentage of homes affected. >> right. >> california, new york, massachusetts, those are the areas. it's probably less than 10% of mortgages. this is the way they went 20 years ago when they were debating this, trying to get
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some cap on the number. >> we were discussing how the whole thing started after the war all those years ago. good stuff, bob pisani. we'll get a preview of what the president wants to get from the ceos he's meeting with later on today. ... what should we inv? maybe new buildings? what about updated equipment? they can help, but recent research shows... ... nothing transforms schools like investing in advanced teacher education. let's build a strong foundation. let's invest in our teachers so they can inspire our students. let's solve this. bob, these projections... they're... optimistic. productivity up, costs down, time to market reduced...
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coming up at the top of the hour, wall street locked out of president obama's meeting with
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ceos. can the fiscal cliff be solved when wall street is ignored? facebook hits the street. and apple days of hypergrowth over? find out why someone says apple could be the new coke at the top of the hour, carl. >> see you in a few minutes. meantime, the president set to hold a news conference in a little less than two hours and meet with ceos from almost every corner of business to talk about how to solve the fiscal cliff. what is the president hoping to get out of this meeting? our john harwood is live in washington with more on that. john, anything more to it than optics? if so, how important is it? >> reporter: i think it's not just optics, carl, i think it's the fact that president obama is trying to leverage the political capital he gained during the election and press people toward his vision of a balanced deal. it's a multi-faceted communications effort. yesterday he meet with labor and liberal leaders. today he's meeting with the
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ceos, as you mentioned. he's also communicating directly with the public through a news conference here at the white house. and he's simply trying to put the pressure on. one thing we know is that this is going to be difficult. look at this statement put out by robert mcdonald, the ceo of procter & gamble before the meeting saying, yes, we support loophole closures to raise money in the tax code, but only in the -- only in the context of tax reform that lowers rates and moves to a territorial system. well, guess what, lowering rates and going to a territorial system costs money, complicates the job. so, the president will have to try to appeal to people across the spectrum to rise above in the language that we're using in our network right now. their narrow parochial interests and go with national interest. >> you mentioned putting pressure on both sides. labor yesterday, business leaders today. is it asymmetric? will today's meeting have a much
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different meeting than yesterday's did? >> reporter: well, labor, of course, is explicitly on the president's team. some members of the business community are also on the president's team. you know, you might say that some of the ceos coming today are the usual suspects who the president involved. jeff immelt of general electric, for example, head of the president's jobs council, he'll be there. business, because of their influence with republicans, is going to be a key target for the administration and for democratic lawmakers. >> we will see what happens, right where you're standing not too long for that. thank you for that curtain-raiser. question is, will both parties rise above and get a job done? senator roy blunt is a republican from missouri, sits on senate appropriations member, republican w.h.i.p. good to have you. >> good to be with you. >> are we getting anywhere this people ahead of the actual
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meeting on friday? >> it doesn't seem like there's much going on this week. i do hope people are getting serious about reaching a conclusion. one thing is divided government is a good time to solve big problems. but divided government failed the last two years. we've got another two years of it ahead of us. we should try to solve these problems. nobody's going to get them solved all their way, but we don't want to solve them in a way that causes problems for the economy. that needs to be at the top of the list of looking for solutions. and the president leading needs to be right there at the top of the list as well. >> a couple of things. yesterday jay carney talking about the combination of higher rates and a limit on deductions. today we wake up to this $1.6 trillion number. are we already seeing the sides retreat to their corners, as they say? >> well, if you do that we won't get anything done. if we don't get anything done there's a reason they call it the fiscal cliff. you don't want to go off it. everybody that evaluates the
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economic impact of that says it will have recessionary impact. there's a lot of money sitting on the sidelines right now, more than every before. people are looking at the sig l signals that they need to look at to decide whether they want to move forward and do things that create private sector jobs. surely, that's what the president ultimately wants. and to do that, he's going to have to be very careful about the way he leads through the next few weeks. >> yeah. unfair to say you are discouraged at this early stage. clearly we don't know what he's going to say at 1:30 but a lot hinges on the tone he's going to take. >> a lot hinges on the tone he's going to take and a lot hinges on the next ten days or so. my belief is when the house and senate leave here this week, the work of trying to put a package together just begins on friday and hopefully that will be done the weekend after thanksgiving and we can come back and get
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some of these things done and send a clear message to the job creators and the investors in the country that the government's going to head in the right direction and they need to head in a good direction for private sector job creation as well. >> senator, the hill has a story up on their website right now, talking about the -- what they argue as the continued marginization of grover norquist and hard anti-taxation. they say to the freshmen class, fewer and fewer are willing to take that pledge. are you getting any sense there is some give among lawmakers who in a prior era might have said, i already promised not to do this? >> i think you see some give in the willingness of republicans, the speaker of the house, the republican leader in the senate to look at the tax code and figure out how you modify the tax code, change the tax code where you're not picking as many winners as losers -- winners and losers, but you're also in the changing the tax code not
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raising the marginal rates in a way that discourage people for making spending decisions of all kinds, including spending decisions that create jobs. >> senator, we're on pins and needles to a large degree the market is, too. good to have your insight. thank you. senator roy blunt of missouri. a programming note at 1:00, a cnbc special report, rise above, focusing on fiscal cliff, and at 1:30 we'll cover the president's news conference live. stay tuned to cnbc. what do a spaceship, a new way to skim oil and super fuel efficient cars have in common? they were products of the ex-price competition. we'll talk to the ceo of x-prize and see why he thinks it's still the key to job creation in this country.
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some of the biggest investment add advisers getting together at schwab impact 2012 conference. one of the topics being discussed, innovation and how to spur it on. our next guest might have one of the best ways to doing it, joining us from chicago, peter diamandis is founder, chairman and ceo of the x prize foundation. good to have you.
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good morning. >> carl, it's a pleasure to be here. thank you. >> you know, we talk about innovation all the time as sort of this big emorphus thing, but in your core belief is it leads to a firm number of jobs. i wondered if i could quantify exactly what you're talking about. >> what i'm talking about, yeah, we have problems here in the moment today but literally we're living it in the world that's being transformed. over the last 100 years the human life span has more than doubled per capita, for every nation it'sled. cost of food is down triple fold. all of those are being driven by technology. and it's not stopping. it's accelerating. i just wrote a book called "abundan "abundance," i look at how it's creating jobs, bringing the cost of living down and giving us abundance in a range of areas worldwide.
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>> we talk -- i mean, when -- the word innovation tends to be followed by something like apple or something regarding a smartphone, but there's a lot going on in energy, there's a lot going on in space, there's a lot going on in transportation. where do you think our spot is sweetest right now in this country? >> well, i mean, the united states still remains the top innovation nation. it's the mindset that you're allowed to fail and start again and try again. silicon valley i run an organization where we're incubating about a dozen new companies every year in synthetic biology, in artificial intelligence, robotics. these are the technologies that are going to be as powerful this decade as the web and mobile were in the last couple of decades. it's really allowing small teams to do what only governments and large corporations could do before. it's one of the morse excist ex times to be alive. it's transforming our economy in a positive fashion. >> you bring up government at a time where there's a lot of
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debate over the government's role in pushing technology in ways that some argue the private sector can't. we had elon musk here yesterday, who is to a large degree, benefitted from subsidiesubsidi. is there a place for those or should this be left to the private sector, guys like you to help encourage that along? >> it is really a partnership. i'm chairman of the x-prize foundation. we put up very large, million to $30 million prizes out there in the world and say, the first person to solve this problem wins. elon musk, larry page, james cameron are all trustees of the x-prize. what we do is find a problem, a market problem, something's stuck. we create a target. we put a large cash prize. then we challenge teams around the world to solve it. you know, in a lot of cases we do this in partnership with the government. the obama white house, doe, nasa, darpa have all been partners in doing this. so, i think, you know, it's really a partnership between corporations, philanthropy and
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the government to focus on problems. i personally don't believe there is no challenge that cannot be solved with the right capital, passion and technology. >> yeah, this country has proven that time and time again over the past 200 and some odd years. >> absolutely. it's a long road perspective. >> have a great time in chicago. we'll see you soon. peter diamandis joining us from schwab impact 2012. a lot more from there all day today on cnbc. two exclusives coming up on "closing bell," george roberts, walter bettinger, ceo of charles schwab. they say beauty is in the eye of the beholder. one contemporary painting is in the home of the person with the largest wallet. what do you think this work went for? what a gorgeous rothko. with the spark cash card from capital one,
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when we got married. i had three kids. and she became the full time mother of three. it was soccer, and ballet, and cheerleading, and baseball. those years were crazy. so, as we go into this next phase, you know, a big part of it for us is that there isn't anything on the schedule.
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>> would you pay just over $75
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million for this painting right here? at sotheby's evening sale of contemporary art in new york last night, someone did, after a prolonged bidding war, mark rothko's number one, royal red and blue, sold above the high-end estimate of $50 million. it is the second highest price achieved for the artist at auction. previously number one, royal red and blue, described as large scale masterpiece had remained in the same collection for about 30 years. cisco, biggest gainer on the dow, nearly five times that of hp. a lot going on in the enterprise space today. that does it for us. let's get back to headquarters, w wapner and "phat money halftime yt ". it is thus far a down day on